Ropella 360EXAMPLE CALCULATION
Level: COO | Salary: $250,000 | Annual Revenue: $40,000,000
Lost Productivity
This reflects the lost decision-making and oversight during the vacancy period.
Calculation: Cost per day = 1/10th of % of Leadership Impact x Annual Revenue/250 Working Days per Year
Revenue Impact
This accounts for the leadership’s influence on overall revenue generation. The percentage can be adjusted based on the role’s impact on strategic decisions, growth initiatives, etc.
Calculation: Cost per day = Annual Revenue x % of Leadership Impact / 250 Working Days per Year
Recruitment Cost
Executive search firms often charge up to 20-35% of the Annual Compensation for an Executive Level role. Includes any other expenses related to finding and onboarding a new leader.
Calculation: (25% search fee + 10% onboarding/admin expenses) x 110% for each month vacant
Strategic Impact
This component is harder to quantify but can be based on the estimated value of delayed or missed high-level initiatives, new partnerships, or major decisions that require the C-suite leader’s involvement.
Calculation: 2Xs Annual Compensation
Morale Impact
A vacant leadership role can negatively affect senior management and overall employee morale, potentially increasing turnover or reducing productivity.
Calculation: .04% of Total Revenue
Operational Costs
Interim leader, diversified workload, additional travel, and admin costs.
Calculation: 5% of Annual Compensation per month
EXAMPLE CALCULATION
Level: COO | Salary: $250,000 | Annual Revenue: $40,000,000
Cost of Rejected Offer: $841,000
Calculated by taking the Daily Cost of a Vacant Position x 60 days
*In addition to the costs associated with the vacancy pre-Offer
EXAMPLE CALCULATION
Level: COO | Salary: $250,000 | Annual Revenue: $40,000,000
Minimum Annual Cost of Bad Hire
*Does not include Reputational Damage and potential Legal Costs
Recruitment Cost
35% of Annual Compensation (includes search fees at 25% and administration estimated fees at 10%)
Lost Productivity
Calculation: Cost per day = 1/10th of % of Leadership Impact x Annual Revenue/250 Working Days per Year
Revenue Impact
Cost per day = Annual Revenue x % of Leadership Impact / 250 Working Days per Year
Severance Costs
50% Total Compensation (6 months’ salary + benefits)
New Recruitment Costs
35% of Annual Compensation (includes search fees at 25% and administration estimated fees at 10%)
Cultural Impact
50% Total Compensation